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US GDP Prints in Line Leaves FX in A Stalemate

US Q3 GDP expanded  at a slightly slower pace than expected rising 2.0% versus 2.1% eyed.  Consumer spending increased at 2.6% up from 2.2% the quarter prior as demand continued to improve slowly. However much of the benefit of the increase in spending went to imported goods and services with imports rising by a whopping 17% while exports increased at a much more modest 5% rate.


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Overall the GDP data provided few surprises for the market and indicates that the expectations for QE2 program from the Fed remain unchanged especially in light of the fact that business investment remained muted inviting further monetary accommodation.  However, the GDP reading was no means horrid and therefore the likely scenario for the Fed is one of gradual, incremental implementation of QE2 rather than a massive monetary infusion.  Therefore further dollar selling may be limited.

 



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The greenback weakened in the aftermath of the release with EUR/USD spiking  above 1.3900 but the pair could not hold its gains in pre open New York trade as the QE story appears to be largely priced in. Cable also could not take out the key 1.600 level as anti-dollar momentum withered. Most importantly USD/JPY was able to maintain its 80.50 support in a clear sign that the worst of the dollar selling may be over for now.      Today’s news satisfied neither the bulls nor the bears and the price actions suggests that we may remain in a tense stalemate until the FOMC announcement next week that should hopefully clarify Fed’s policy initiatives going forward.

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http://finance.yahoo.com/news/US-GDP-Prints-Line-Leaves-FX-gftforex-2423801101.html;_ylt=ArDxJ3.p1ALs1CgIVg4K9OKiusF_;_ylu=X3oDMTFkdDRyY2piBHBvcwMxBHNlYwNuZXdzSHViQXJ0aWNsZUxpc3QEc2xrA3VzZ2RwcHJpbnRzaQ--?x=0

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